28th February 2025
In Greek legend, Achilles was a hero of the Trojan War, known as the greatest of all the Greek warriors. Homer’s poem The Iliad, which details Achilles’ story, begins after the Trojan War has been going on for nine long years.
Thankfully, the investment trust sector hasn’t had to go through nine years of bloody warfare before Achilles has entered the sector’s story – although the past three years has felt at least three times as long as that with discounts widening aggressively and becoming increasingly entrenched.
This week the investment trust sector welcomed the launch of Achilles Investment Trust, which for full disclosure we backed in several of the mandates we manage. It is a sign of the times that the first IPO in the sector in two years is one focused on unlocking the value from the deep discounts many investment trusts trade on.
We have written much about Saba Capital and their impact on equity-focused investment trusts and efforts to unlock value from that part of the trust universe. However, the sector has also been crying out for an activist investor focused on targeting the alternatives universe (property/infrastructure/private equity) where discounts have widened egregiously. This is where Achilles steps in.
Managers Rob Naylor and Christopher Mills have form in unlocking value from alternative focused investment trusts, with RoundHill Music Royalty, Hipgnosis Songs and PRS REIT discounts all benefiting from their involvement through significant discount narrowing.
Regular Crescendo readers will know it is incredibly rare for us to back an IPO. Paying £1 for 98p of assets (often less once cash deployment costs are added in too) is hard to swallow, especially when day 1 investors take on all the execution risks. However, there are always exceptions to rules.
We are impressed at the limited life nature of the trust, its highly concentrated, deeply activist approach and the knock-on benefits it could have for our holdings across the investment trust universe. This is not an evergreen, asset gathering machine. It’s not a strategy that could be executed with an open-ended vehicle. It’s a performance focused warrior entering the sector at a time of rich opportunity.
We have been extensively engaging with the boards of alternative investment trusts over the past couple of years and have welcomed the enhanced focus on capital allocation policies and the shareholder experience from many of them. But the fact is despite initial efforts, discounts remain far too wide, and much more can and should be done to close them. Achilles can help lead the charge in that regard.
We hope that in Investment Trust legend, Achilles will prove a hero of the discount war in the alternatives sector. Unlocking the value for shareholders not just in the trusts that are targeted, but in the wider ecosystem as similar trusts enjoy the knock-on effect of their actions.
Dan Cartridge – Fund Manager
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